Question

​Serenity, Inc.'s Receivable increased by $ 43 comma 000 and its Accounts Payable increased by $ 23 comma 000. What is the net effect on cash from operations under the indirect​ method?

Answer 1

A net cash outflow or cash used up of $20,000

Step-by-step explanation:

The statement of cash flows show the movement in cash balances between the start and end of an accounting period. This movement is as a result of 3 groups of activities namely; operating, investing and financing activities.

Cash activities related to elements of working capital are recognized in the operating section. An increase in a current asset other than cash is treated as an out flow of cash while an increase in a current liability is treated as an inflow of cash and vice versa.

Hence the net effect on cash from operations under the indirect​ method

= -$43,000 + $23,000

= -$20,000